Tuesday, June 4, 2013

The effect of EU enlargement on tourism industry

Tourism in Europe is considered the largest in the world. Between 1950 and the turn of the 21st century, the number of international tourist in Europe increased by over twenty times (Williams and Balaz, 2000 as cited in Meireder, 2005). Tourism has been considered as one of the economic forces of EU. Tourism contributes to the economy in a number of ways for instance in the labour market as well as in the general economy of the countries. The European region has recorded a very high rate of enlargement in the past years. In 2004, a total of 10 countries joined the EU. This growth of the union now has 25 members. This growth has continued (McCool and Moisey, 2008). The enlargement of EU has brought significant changes to the policies of the countries which were traditionally not members of the EU. The tourism in the EU has been affected by the enlargement through the possibilities and conditions that have been created by the policies which govern the operation of the union. The enlargement of the EU has ensured that there is the free movement of people and goods, the deregulation of the transport industry especially the air transport, the single euro currency and the free trade and the development of a single EU market (Havlik, 2002 as cited in Meireder, 2005). The free trade also ensures there is a free movement of labour between the member countries while also ensuring that this labour sis treated fairly regardless of their country of origin as long as they are members of the EU. The essay is a discussion of the effects of the EU enlargement on the tourism industry. The EU enlargement would influence the tourism industry through a variety of instruments. The first is the single market economy which would allow open completion among the different countries that make up the body. The free movement of labour would also be another important avenue through which the enlargement would affect the tourism industry. The third policy area in which the EU enlargement will affect tourism is through the single Euro currency which will be used by the members of the union. The other is the liberalisation of the movement of people and also of transport services particularly the introduction of ‘no frill air carriers’ (Meireder, 2005). The EU enlargement poses both positive and negative effects on the tourism industry. The first positive effect of the Enlargement is the increase in the tourist flow numbers especially across the countries that have become members of the body. Due to the provision of free movement of people across the borders of the countries will increase as a result of better economic growth among the member countries especially the new members (Merkl, 2004 as cited in Meireder, 2005). Merkl went ahead to state that due to the growth potential of between 2-4 per cent for the new countries would lead to an increased flow of tourists from the new member countries to the other countries of the EU. The increased outflow of tourists from new members of the EU to the old members will be as a result of the increased purchasing power of the people as they will be able to afford more travel (Bartenstein, 2004 as cited in Meireder, 2005). In Austria alone, there was a noted increase of 14 per cent in the numbers of overnight tourist stays to stand at between 300,000 and 400,000 per year. This population of new tourists was drawn from the new counties which joined the EU. According to the World Trade Organisation (WTO) as cited in European Business Review (EBR) (2004), the EU enlargement would lead to a more coherent and complete tourism industry in Europe. EBR (2004) also quote the Secretary General as saying that the collapse of the borders of the different countries brought about by the enlargement of the EU would lead to an increase in the West-East flow of Tourists and vice versa. The benefit of increased tourist flows has also been recorded in Bulgaria and Croatia which recorded very high numbers of tourists from new members of the EU for instance Poland, Czech Republic and Hungary (EBR, 2004). The enlargement of the EU also led to an influx in the countries for instance Latvia where a survey carried out in 2005 indicated that 37 per cent of the visitors that entered the country were arriving in Latvia for he first time (Central Statistical Bureau of Latvia, 2006). The second positive effect that the enlargement of the EU has had on the tourism is the benefit that is brought about by the promotion of the EU as a single destination (Hall, Smith and Marciszewska, 2006). The countries that were receiving lower tourist numbers in the EU can now benefit from the common promotion practices that have been started in the tourism industry. There has also been an informational benefit due to the fact that destinations which previously received very little attention are now promoted. This has increasingly opened up new locations which were previously not explored by the old European tourists. From these new locations, there has been an increase in the numbers of tourists who visit thus increasing the revenues which would have otherwise been spent in other tourist locations (Lohmann, 2004). The locations which were previously not known are marketed and promoted together with those locations which were already known and thus contributing to the exploration of these unknown locations. This has led to an increase in the tourist numbers as well as the revenues that are gotten from the ventures. Economic benefits by the rural areas through the jobs that are created and the income from the tourist activities (Schmied, 2005). The increased tourism in the rural areas has also contributed towards constraining the out-migration from the rural areas. The cultural and historical connections to some of the countries have led to an increased tourist numbers in those countries. An example is the Baltic States which comprise of Latvia, Lithuania and Estonia which have received an increasing number of visitors from the countries which they have historical connections with for example Sweden and Germany (Central Statistical Bureau of Latvia, 2006). The capitals of the three countries are considered as World Heritage sites by the UNESCO. Riga is situated on the banks of river Daugava and it has baroque, gothic and classic architecture. Riga also boasts of the largest art nouveau buildings in Europe and it also has unique wooden buildings in its suburbs. On the other hand, Vilnius is also on of the largest baroque towns in the whole of Europe and in some cases, the town is referred to as the Baltic Jerusalem as it enshrines remnants of the Polish, Lithuanian and Jewish cultures. Finally, Tallinn is medieval town which is well preserved and has a picturesque dotted with bars and restaurants. These historical connections attract people to these towns and thus they are even inclined towards exploring even the interiors of the countries thus an increase in the number of visitors which would have otherwise not been realised (Druvaskalne and Slara, n.d.). Due to the reduction in the barriers that travelers faced before the implementation of one visa union, there has been an increase of tourism activities to the countries which travelling was too cumbersome for the tourists. An example is the Eastern countries for instance Poland. This country has received an increasing number of tourists from the old countries that used to visit it, but were constrained by the real barriers. Statistics has shown that most of the EU tourists still prefer their old tourist locations but are now freer to visit them without any restrictions whatsoever. The trend is also the same for tourism giants in Europe; Italy and Spain which have all continued to reap from the free movement of people as well as goods (Jolly, 2003). The enlargement of the EU has been an indication of the stability of the region thus there will be more tourists visiting the area due to the enlargement and the associated political stability. The political stability of the EU has ensured that the tourist numbers to the bloc increase even amidst the drop in the global international tourist numbers. Due to the risk adverse nature of tourism, more tourists will prefer to visit locations where their security and good tourism experience is assured (UNWTO, 2006). This statistics by the world tourism body are a clear indication of the effects of the political safety can have on the tourist flows. The enlargement of the EU has also led to an increase in business opportunities for the members countries. The higher gross domestic products in the new countries will lead to a stable approximation of the incomes of the people in those countries thus there will be a high tourist numbers and business generated from the new members of the EU. The average low income in the new member states has led to the rapid development of cheaper and smaller accommodation to tap on the family accommodation. The family run accommodation has increasingly become common place due to the huge numbers of customers who prefer the family settings as compared to the five star hotels. The growth of this type of tourist accommodation can be attributed to the fact that the new accommodations can be able to change their offers to be in line with the wishes of the consumers thus are able to establish long running relationships with the consumers (Stephanou, 2006). The increased tourists’ numbers in the larger EU has led to an increase in the number of job opportunities that are created in the tourism industry. The tourism sector has created better and a higher number of jobs for the citizens of the countries which are members of the EU. The higher job numbers has led to the achievement of the Lisbon strategy whose main concern was to ensure that the industry was able to respond to the job market by creating job opportunities for the people. The growth in the creation of employment opportunities surpassed that of the other sectors of the economies of the 27 member community. The HORECA sector has also contributed to the reduction of unemployment among the youth as 22.4 per cent of all the employees in the sector were between the age of 15 and 24years w2hile people above the age of 55 years comprised 8.8 per cent as compared to almost 12.8 per cent in the whole economy (Leidner, 2007). The enlargement of the EU has also led to the development of transportation facilities and means which are supposed to serve the more open economy of the countries. The first major development in the transportation is the increased use of low cost airlines which are supposed to serve the growing tourist numbers. This has been mainly due to the liberalisation of the transportation which has led to the continued use of ‘no frills airlines’ (Sajdik and Schwarzinger, 2008). The enlargement of the EU has led to the opening up of the Central European countries such as Poland to these developments in the airline industry. There was an impact on the Polish airline LOT which before the accession had the highest prices among the air service providers in Europe especially due to the fact that LOT enjoyed monopoly. After the enlargement and the accession, the polish tourists were more encouraged to use airlines as the costs had significantly reduced. Still on the case of Poland, several airlines entered the market in 2004 leading to the growth of polish passenger numbers by almost 26 per cent (dpa, der Standard, 2005 as cited in Meireder, 2005). There have also been some negative effects of the enlargement of the EU on the EU on tourism industry. These negative effects have been massive on the Eastern Europe countries which joined the union. The first major negative effect is the skewed demand for tourism that has been created mostly to favour the old members of the EU while the new members languish with very few tourist numbers. Although this scenario was not planned, it has played out strongly due to the fact that the images of the tourist attractions in these new destinations are not known as those of the old members of the EU (Knowles, Diamantis and El-Mourhabi, 2004). The decision to go for a holiday will thus be formed by these images that the tourists have of the locations. It is important to note that mot of the holiday makers from the old EU members no very little about the tourist attractions in the new members’ countries and in some cases thy have some incorrect assumptions about the destinations. When they think of a holiday location, they do not automatically consider this countries du to the different holiday motives that they may have. The skewed demand has also been caused by the differences in the gross domestic products by the different countries. Due to the high GDP growth in the new member countries (46 per cent) as compared to the 15 old EU member countries (24 per cent) and the high income elasticity of tourism thus skewed tourist movement from the countries with a higher GDP and disposable income to the old countries (Singh, 2008). The demographic characteristics between the countries have also put some of the counties at a disadvantage. There are a higher number of tourists who are above the age of 65 in the old members of the EU. These has an impact on the tourist numbers in the new member countries as they are more inclined to support domestic tourism rather than international tourism. On one hand, the members of the 10 new EU countries travel in huge numbers to the old tourist locations while on the other; there is a high number of domestic tourism. The effects on the economies are very evident as the tourism contributes greatly to the economy of some of the countries as compared to that of the new countries (Armstrong and Anderson, 2007). Although competition is inevitable in free markets, the effects of the free markets on the tourism industry in Europe have significantly been impacted by the competition that arose after the enlargement of the EU. The competition has sometimes led to dwindling numbers of tourist on some traditional locations due to better or more competitive locations being developed in the new members of the EU. Due to the entry of new competitors to the market, there has been a reduction in the growth of tourist numbers for instance North Europe recorded a growth of 0.7 per cent as compared to 9.6 per cent by the Central and Eastern European countries (Vaughan, 2005). Another negative effect of the enlargement of the EU may be an increase in the prices of tourist good and services mostly as a consequence of the huge increase in tourist activities in the new member countries of the EU. Although the high price will ensure that tourism returns are higher and thus the support to the economies will be higher, the increasing costs may make the tourist services to be out of reach of the local citizens of the new member countries. The citizens may not be able to afford vacations that are offered in their own country. The prices of the other products may also bee beyond the reach of the natives of these countries as all will be geared towards satisfying the demand created in the tourist industry (Pizzati and Funck, 2002). From the analysis it can be determined that the enlargement of the EU has had great impacts on the tourism industry in Europe. Considering the economic conditions and the effects, it is very evident that although there are economic benefits, there are also some costs that countries have incurred due to the enlargement of the EU. The positive benefits that have been discussed in the paper include an increased flow of tourist numbers, the opening up of new tourist attractions locations, job creation, reduction of barriers and many others. While it is commendable the effect that the enlargement has had, the negative effects of the enlargement must be dealt with if the support of the community among the different countries is to be maintained. To reduce the effects that the enlargement can have on the different countries, the structural funds from the EU for example the European Regional development Fund (ERDF), the European Agricultural and Guidance Fund (EAGGF) and the European Social Fund (ESF) should be used so that the social and economic disparities between the countries can be reduced. 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